RAJAT INDULAL DOSHI, MUMBAI V. A.C.I.T. CIRCLE 16(1), MUMBAI

ITA 7243/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2128 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MISHRA
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 7242 AND 7243 / MUM/20 1 1 ( / ASSESSMENT YEA R S : 20 0 7 - 08 AND 20 08 - 09 ) MR.RAJAT INDULAL DOSHI, 1 - E, 1 ST FLOOR, DIL PAZIR BHULABHAI DESAI ROAD, WARDEN ROAD, MUMBAI - 400026 / VS. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE NO.16(1), MATRU MANDIR, MUMBAI - 400007. ( / APPELLANT ) .. ( / RESPON DENT ) ./ ./PAN. : AABPD9790M / APPELLANT BY SHRI BHUPENDRA SHAH / R EVENUE BY SHRI S K MISHRA / DATE OF HEARING : 8.9 . 201 5 / DATE OF PRONOUNCEMENT: 7. 10. 201 5 / O R D E R P ER B R BASKARAN, AM : BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY LD CIT(A) - 27, MUMBAI FOR ASSESSMENT YEARS 2007 - 08 AND 2008 - 09. BOTH THE AP PEALS WERE HEARD TOGETHER AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE SOLITARY ISSUE URGED IN BOTH THE APPEALS RELATE TO THE DISALLOWANCE MADE U/S 14A OF THE ACT. 3. THE FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL AND HAS EARNED EXEMPTED INCOME IN THE FORM OF DIVIDEND AND LONG TERM CAPITAL GAINS. THE AO COMPUTED THE DISALLOWANCE IN BOTH THE YEARS U/S 14A OF THE ACT BY ITA NO. 7242 AND 7243/MUM/2011 2 APPLYING RULE 8D OF IT RULES. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) HELD THAT TH E PROVISIONS OF RULE 8D SHALL NOT APPLY TO AY 2007 - 08. HOWEVER, HE DIRECTED THE AO TO COMPUTE THE INTEREST DISALLOWANCE IN PROPORTION TO LOAN FUNDS TO TOTAL FUNDS. IN AY 2008 - 09, HE UPHELD THE DISALLOWANCE MADE BY THE AO. 4. THE CONTENTION OF THE ASSE SSEE BEFORE US IS THAT THE ASSESSEE IS POSSESSING SUFFICIENT INTEREST FREE FUNDS TO COVER THE INVESTMENTS AND HENCE THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE AS PER THE DECISION OF THE HONBLE JURISDICTIONAL MUMBAI HIGH C OURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (331 ITR 340). THE LD A.R ALSO PLACED RELIANCE ON THE DECISION RENDERED IN THE CASE OF HERO CYCLES (323 ITR 518). 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS NOT ESTABLISHED ONE TO ONE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND THE INVESTMENTS MADE. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE PROVISIONS OF RULE 8D SHALL NOT BE APPLICABLE FOR AY 2007 - 08 IN VI EW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD (328 ITR 81). HOWEVER, IT IS SUBMITTED THAT THE LD CIT(A) HAS FOLLOWED THE SAME METHODOLOGY AS PRESCRIBED IN RULE 8D FOR COMPUTING THE INTEREST DISALLOWANCE FOR AY 2007 - 08. HOWEVER, THE MAIN CONTENTION OF THE ASSESSEE IS THAT THERE IS NO REQUIREMENT TO MAKE ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE, SINCE THE INTEREST FREE FUNDS ARE FAR IN EXCESS OF THE INVESTMENTS MADE. IN THIS REGARD, THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (SUPRA). WE NOTICE THAT THE TAX AUTHORITIES HAVE NOT EXAMINED THIS CONTENTION OF THE ASSESSEE WITH REFERENCE TO THE BALANCE SHEET AND ITA NO. 7242 AND 7243/MUM/2011 3 FUNDS POSITI ON OF THE ASSESSEE. HENCE, IN OUR VIEW, THIS ISSUE REQUIRES FRESH EXAMINATION IN BOTH THE YEARS BY DULY CONSIDERING THE CONTENTIONS OF THE ASSESSEE CITED ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE IN BOTH THE YEARS AND R ESTORE THEM TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE IN ACCORDANCE WITH THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD (SUPRA). 7. IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 7TH OCT , 2015. 7TH OCT , 2015 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 7TH OCT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESP ONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI